S&P Warns Prolonged Middle East Conflict Could Trigger Sharp Rise in Global Credit Risks
S&P Global Ratings has warned that a prolonged conflict in the Middle East could lead to a sharp rise in credit risks if hostilities continue for an extended period. The agency stressed that the repercussions of the conflict may not remain confined to the region but could rapidly spread to the global economy through energy markets, trade flows, and supply chains.
In a new analysis assessing potential risk scenarios, the agency said that short-term disruptions appear largely manageable so far. However, an escalation in tensions or a prolonged conflict could open the door to broader economic shocks, particularly if the war disrupts one of the world’s most critical energy chokepoints — the Strait of Hormuz. Such a disruption could cause significant bottlenecks in global supply chains and trigger sharp volatility in energy prices.
The report noted that any prolonged closure of the Strait of Hormuz could mark a dangerous turning point for global markets. Oil and gas prices would likely experience severe fluctuations, undermining investor confidence and weakening consumer sentiment. This could directly affect the ability of governments and corporations to finance their operations and maintain credit stability.
To assess the scale of potential risks, S&P Global Ratings examined three stress scenarios reflecting different durations and potential trajectories of the conflict. The scenarios aim to evaluate possible economic and financial outcomes while identifying pressures that could affect governments, corporations, banks, and infrastructure sectors across the region, as well as broader implications for emerging markets.
The analysis indicated that economic entities in Gulf Cooperation Council countries may enjoy a degree of protection thanks to strong financial reserves and fiscal buffers accumulated in recent years. These resources provide a certain level of resilience against short-term shocks. However, prolonged instability could gradually increase pressure, particularly on entities heavily dependent on export revenues or those with more fragile balance sheets, as well as sectors and economies highly sensitive to shifts in financial market confidence.
The agency also warned that an extended conflict could reshape the credit risk landscape across several emerging markets. Energy price volatility and declining investment flows could increase financing costs and elevate risk levels for both governments and corporations.
